Annual Limits

Annual limits are the total benefits an insurance company will pay in a year while an individual is enrolled in a particular health insurance plan.

Starting in 2014, the Affordable Care Act bans annual dollar limits.  Until then, annual limits are restricted under the Department of Health and Human Services (HHS) regulations published in June 2010.

For plan years starting between September 23, 2010 and September 22, 2011, plans may not limit annual coverage of essential benefits such as hospital, physician and pharmacy benefits to less than $750,000.  The restricted annual limit will be $1.25 million for plan years starting on or after September 23, 2011, and $2 million for plan years starting between September 23, 2012 and January 1, 2014. For plans issued or renewed beginning January 1, 2014, all annual dollar limits on coverage of essential health benefits will be prohibited.

Protecting Coverage for Workers

A small number of workers and individuals only have access to limited benefit, or “mini-med,” plans with lower annual limits than are generally permitted by law and which can provide very limited protection from high health care costs.  Employers and insurers estimated that requiring mini-med plans to comply with the new rules could cause mini-med premiums to increase significantly, forcing employers to drop coverage and leaving some workers without even the minimal insurance coverage they have today.

In order to protect coverage for workers in mini-med plans until more affordable and more valuable coverage is available in 2014, the law and regulations issued on annual limits allow the Department of Health and Human Services (HHS) to grant temporary waivers from this one provision of the law that phases out annual limits if compliance would result in a significant decrease in access to benefits or a significant increase in premiums.  Plans that receive waivers must comply with all other provisions of the law and must alert consumers that the plan has restrictive coverage and includes low annual limits.  Additionally, these waivers are temporary and after 2014, no waivers of the annual limit provision are allowed.

On June 17, 2011, the Centers for Medicare & Medicaid Services (CMS) introduced a process for plans that have already received waivers and want to renew those waivers for plan or policy years beginning before January 1, 2014.  The new guidance extends the duration of waivers that have been granted through 2013, if applicants submit annual information about their plan and comply with requirements to ensure that their enrollees understand the limits of their coverage.  Existing waiver recipients must apply to extend their current waiver and all applications must be submitted by September 22, 2011; after that date applications for an extension will no longer be considered.  Any plans that have not yet applied for a waiver also must apply by September 22, 2011.

In addition, CCIIO has issued guidance with respect to the application of the existing annual limit waiver criteria to Health Reimbursement Arrangements (“HRAs”).  CCIIO published supplemental guidance on August 19, 2011 that exempts HRAs that are subject to the restricted annual limits as a class from having to apply individually for an annual limit waiver.  An HRA in effect prior to September 23, 2010 is exempt from applying for an annual limit waiver for plan years beginning on or after September 23, 2010 but before January 1, 2014.  These HRAs still must comply with the record retention and Annual Notice requirements to participants and subscribers set forth in the supplemental guidance issued on June 17, 2011.  CCIIO has tailored the model notice to the unique circumstances of HRAs.